Casual versus permanent employment: what is the difference?
It pays to know whether you're an employer or employee, law firm Johnston Withers explains.
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What is casual employment?
All employees are either casual employees or permanent employees.
Casual employment is not defined in Australian law, though it is generally characterised as performing work on an irregular basis where there is no guarantee of ongoing work. It usually involves working “as needed”, which often means working variable hours from week to week.
By contrast, permanent employment involves working regular hours, in circumstances where the employment relationship is considered to be ongoing.
Why does it matter?
It is important for both employees and employers to know whether employees are casual or permanent because the nature of their employment relationship will determine the employee’s entitlements. For example, unlike casual employees, permanent employees are entitled to various types of paid leave and have additional protections in relation to termination of their employment under Australian legislation such as the Fair Work Act. Casual employees are entitled to be paid loading in lieu of these entitlements.
The Federal Court’s decision in the 2018 case Workpac v Skene established that some workers who are engaged on a “casual” basis may actually be permanent employees. In this case, the court emphasised that the characteristics of an employment relationship, and not just the label placed on the employment relationship at the time the employee is engaged, must be considered to determine its nature.
The Skene case involved a truck operator, Mr Skene, who was engaged by a labour hire company to work on a on a mine site in central Queensland. His employment contract and associated documents described his prospective employment as “casual employment” and expressly stated that he was to work “on an assignment by assignment basis, with each assignment representing a discrete period of employment”.
However, the employee was required to work on a rotational roster – seven days on, seven days off – with his hours of work for the entire 12-month contract period set out at the time he was engaged.
After approximately 22 months in his position – and 24 months working for the company – the employee’s employment was terminated.
He claimed that he was not actually a casual employee, but was in fact a permanent employee, and was accordingly entitled to receive payment in lieu of the paid leave he had accrued during his employment.
The Federal Court considered the nature of the employment relationship between the employee and the employer, and particularly the extent of uncertainty and irregularity of his work. The court emphasised that employers do not have the power to “unilaterally determine which category an employee should be classified into”. It found that the employee had been employed on a regular and systemic basis, and that there was a firm advance commitment between the employee and the employer as to the duration of the employee’s work. The court therefore found that the employee was a permanent employee and was entitled to payment in lieu of the leave he had accrued at the date of termination.
The fallout from Skene
The Federal Court’s decision in Skene was significant for Australian law on casual employment. The decision caused some employees and employers (particularly in industries such as mining) to reconsider the nature of their employment relationships.
The decision also prompted almost 10,000 workers who had been engaged as casual employees to commence a class action against WorkPac, the labour hire company who hired Mr Skene, seeking payment in respect of their leave.
It also caused some employers to raise concerns about the possibility of employees “double dipping” insofar as they receive a casual loading while employed, and are then found to also be entitled to payment in lieu of accrued leave when their employment comes to an end.
Following the decision, the federal government amended the Fair Work Regulations to the effect that where an employee is engaged on a casual basis but later deemed to have been permanent employee, the employer may take into account any loading paid to that employee to offset the amount of leave the employee had accrued. The rationale behind the amendment was to minimise the impact of the misclassification of employees on their employers.
This amendment came into effect on December 18, 2018. However, the Federal Court decision in the 2020 case of Rossato has limited the operation of the amended regulations.
The Rossato case involved a coal mine worker who had been engaged by labour hire company WorkPac as a casual employee. He had worked at the same mine site pursuant to six separate contracts of employment over a period of almost four years.
In the Rossato case, the Federal Court adopted and confirmed its reasoning in the Skene decision. It found that where there is a firm advance commitment as to work, the employment relationship is unlikely to be casual, despite what it is labelled. The court set out certain criteria indicative of casual employment:
the employment is irregular or intermittent, rather than stable or regular;
the employment is informal;
the employee works as needed over a short period of time;
the employment is not likely to continue for any length of time;
the employer has discretion to choose whether to offer employment on a particular day;
the employee has discretion to choose not to work when work is offered by the employer;
the employee is employed “by the hour”; and
the employment relationship may be terminated on one hour’s notice.
In addition to confirming the Skene decision and setting out these criteria, the Federal Court addressed the amended regulations. In the Rossato case, the employee had taken unpaid personal leave throughout his employment. This leave would have been paid leave had he been considered a permanent employee. As the amended Regulations were intended to apply to accrued leave, rather than taken leave, the court found that the employer was not able to take into account any loading paid to the employee to offset its liability, as provided for in the amended regulations. The employer had to make payment to the employee in relation to all leave taken during his employment, including payment for public holidays and Christmas shutdowns, regardless of his receipt of casual loading.
What do these decisions mean for casual workers?
The Skene and Rossato decisions confirm that the label placed on an employment relationship is not determinative, and that the court will look to the actual circumstances of the employment relationship to determine its true nature.
As a result of these decisions, it may be the case that some workers who were engaged as casual workers are in fact permanent employees, with additional entitlements under the Fair Work Act.
Johnston Withers: experience you can trust
Johnston Withers Lawyers’ employment lawyers have extensive experience in providing advice to both employees and employers in relation to entitlements and workplace relations. If you’d like advice or direction from a lawyer, please contact us on 8532 5800 or get in touch online.